Alternative dispute resolution processes have seen a sharp rise in recent times, primarily due to their manifold advantages over the conventional method i.e. litigation. The Ministry of Law and Justice, in its report submitted to the Parliament in September 2014 revealed that India is facing a shortage of over 6,000 judges. It is worthwhile to state that between 2006 to 2018, India has seen an 8.6% rise in the pendency of cases across all courts1 consequently increasing the time required by a court to decide a case. These factors make litigation in India avoidable, especially in contractual disputes which can be settled through alternate mechanisms like arbitration which is governed by the Arbitration & Conciliation Act, 1996 ("Arbitration Act").

The judiciary has played a pivotal role in promoting and making India an arbitration friendly state, and time is not far when India will pose a serious challenge in hosting arbitrations qua foreign jurisdictions. The Supreme Court of India and various High Courts have adopted a hands-off approach to disputes resolved by means of arbitration when such decisions have been challenged by a party. The courts in India have consistently adopted arbitration friendly approach in the recent past. There are many instances when the courts have upheld the arbitration agreements even when they have suffered from some minor errors thereby respecting the parties' choice to have their disputes settled by arbitration. The Supreme Court while taking a pro-arbitration approach has upheld an arbitration agreement in spite of the error it suffered and concluded that since the intention of the parties to arbitrate was clear, the Court can make the arbitration agreement workable even if it has some errors in it.2

The courts have ordinarily refused to interfere with the awards passed under the Arbitration Act where parties have tried to bypass the provisions of the Arbitration Act. The Supreme Court while taking a pro-arbitration view did not interfere with an order on the ground that the party had appealed against an order passed under the Arbitration Act under Section 13 (1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Court Act, 2015 ("Commercial Courts Act, 2015") and observed that the appeals with respect of arbitration are only governed by the Arbitration Act.3 A party cannot use the appeal provisions of the Commercial Courts Act, 2015 to bypass the provisions of the Arbitration Act if no appeal is provided under the provisions of the Arbitration Act.

Further, the courts have been cautious in granting anti-arbitration injunctions. The Bombay High Court has held that when a party has remedies available under the Arbitration Act, it cannot obtain an anti-arbitration injunction from Court by ignoring the provisions of the Arbitration Act.4 In this case, a party alleged that one of the arbitrator was appointed after collusion with the other party and without following the procedure agreed upon and hence sought an order from the Court restraining the arbitral tribunal from proceeding with the arbitration. The Bombay High Court held that the party making such allegations has a remedy available under Section 12 of the Arbitration Act to challenge appointment of an Arbitrator and hence it cannot be allowed to bypass the provisions of the Arbitration Act.

In another recent judgment5, the Supreme Court while dealing with the question of arbitrability of fraud held that 'serious allegations of fraud', leading to non-arbitrability would arise only if either of following two tests were satisfied, and not otherwise:

  • Where the Court finds that the arbitration agreement itself cannot be said to exist being vitiated by fraud; or
  • Where allegations are made against the State or its instrumentalities, relating to arbitrary, fraudulent, or mala fide conduct, giving rise to question of public law as opposed to questions limited to the contractual relationship between the parties.

Therefore, while limiting the grounds on which a party can avoid arbitration citing fraud, the court held that all cases involving allegations of fraud would be arbitrable except the ones that pass the above test.

The judiciary has also proactively responded to amendments introduced by the Legislature which have been against the core intent of the Arbitration Act. The Arbitration & Conciliation (Amendment) Act, 2019 introduced Section 87 which provided that the 2015 Amendment Act was applicable prospectively. This meant that the amended Section 36 as introduced by the 2015 amendment would not apply to petitions filed under Section 34 against the arbitral awards which were passed in the arbitration proceedings commenced before commencement of the 2015 Amendment Act, i.e., 23rd October 2015, thereby bringing back the regime of automatic stay of execution of Arbitral Awards passed in the proceedings initiated before the 23rd October 2015. Section 87 was directly in conflict with the judgment of BCCI V. Kochi Cricket Private Limited & Ors6. The Supreme Court in Hindustan Construction Company Limited & Anr. V. Union of India & Ors.7 struck down Section 87 as introduced by the 2019 Amendment, hence restoring the position laid in the BCCI V. Kochi Cricket Private Limited & Ors (supra) case. The Supreme Court read Section 35 (which deals with finality of an award) along with Section 34 and 36 to state that it was never intended that a petition seeking setting aside of an arbitral award would automatically stay enforcement of the said award. It further observed that filing a petition seeking setting aside of an arbitral award therefore would not provide an automatic stay against the enforcement of any arbitral award, irrespective of when the arbitration was commenced.

Even though the courts have tried to remove hurdles during and after the arbitration process by ordinarily refraining from interfering with the decisions of the arbitral tribunals or passing other arbitration friendly judgments, however, this by itself may not be sufficient to attract overseas entities to opt for arbitration process in India. In our view, the following may go a long way in providing the necessary comfort to parties that the arbitration process shall no longer be permitted to be unnecessarily prolonged in India:

  1. Efforts should be made to move from ad-hoc arbitration to institutionalised arbitration.
  2. Since the government is the biggest litigator, necessary directives may be issued to all ministries, bodies and public sector undertakings etc. to accept and abide by the arbitration award, except for cogent reasons to be signed off by an officer not below the rank of Joint Secretary.
  3. Heavy costs should be imposed by courts on frivolous petitions filed to challenge arbitral awards.
  4. Arbitrators should be appointed depending upon the nature of the dispute(s).
  5. Number of judges and courts dealing exclusively with arbitration cases should be increased in every jurisdiction.



2. Enercon India Limited & Ors. V. Enercon GmBH & Anr (2014) 5 SCC 1

3. Kandla Export Corporation & Anr. V. OCI Corporation & Anr. (2018) 14 SCC 715

4. Ravi Arya & Ors V. Palmview Overseas Limited & Ors. (2018) SCC OnLine Bom 19886

5. Avitel Post Studioz Limited V. HSBC PI Holdings (Mauritius) Limited 2020 SCC OnLine SC 656

6. (2018) 6 SCC 287

7. (2019) SCC OnLine SC 1520

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.